Advertisement
savings

Don't Get Burned by Falling Rates

The Federal Reserve’s latest rate cuts mean some savers will have to think outside-the-box when it comes to stashing their cash.

In early August, for the first time since the 2008 financial crisis, the Federal Reserve cut its target federal funds rate, lowering the rate by one-fourth of a percentage point. Kiplinger forecasts that two more quarter-point decreases are likely on the way, in September and in October.

Interest rates—even on savings accounts from prominent internet banks, which tend to prop up rates more than brick-and-mortar banks—began dropping a few weeks before the Fed announced the cut. Rates on some long-term certificates of deposit have been falling for months. The trend will likely continue, so savers will have to be creative.

Advertisement - Article continues below

One idea is to stash both your checking and savings balances in a high-yield checking account. The free Kasasa Cash Checking account from TAB Bank, for example, recently yielded 4% on a balance of up to $50,000 if you meet monthly requirements of having at least one direct deposit or payment transfer and making at least 15 debit-card purchases.

Investing in a CD that imposes no fee if you withdraw funds early is one way to capture some extra yield, says Ken Tumin, of DepositAccounts.com. You could, for example, put some savings in a seven-month no-penalty CD from Marcus by Goldman Sachs ($500 minimum deposit). It recently yielded 2.25%, compared with 2.15% for the bank’s savings account. If you decide that the money needs to be more accessible, transfer it to the savings account fee-free.

Slightly better deals for borrowers. If you have debt with a variable interest rate—such as on a credit card or home-equity line of credit and some private student loans—you may see a bit of relief. Based on average household credit card debt of $5,700 and an interest rate of 17.8%, a quarter-point rate reduction lowers the minimum monthly payment by about $1, says Ted Rossman, of CreditCards.com. If you refinance your mortgage (see Now Is a Good Time to Refinance), consider rolling any HELOC balance that you have into the mortgage.

Advertisement
Advertisement

Most Popular

Medicare Basics: 11 Things You Need to Know
Medicare

Medicare Basics: 11 Things You Need to Know

There's Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare --…
September 16, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
September 10, 2020
What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much could it save you?
September 17, 2020

Recommended

18 Things You Should Know Before Shopping at Trader Joe's
Smart Buying

18 Things You Should Know Before Shopping at Trader Joe's

Everything you need to know to save money and shop smarter at the quirky Trader Joe's supermarket chain.
September 4, 2020
When Is Amazon Prime Day 2020?
spending

When Is Amazon Prime Day 2020?

Circumstances beyond its control have forced Amazon to move its annual Christmas-in-July Amazon Prime Day blowout sale in 2020 to ... later.
August 27, 2020
A Guide to Streaming Services
Smart Buying

A Guide to Streaming Services

Competition is growing. That’s giving you more choices—and a chance to save money.
August 27, 2020
Snag a New Account Bonus
Basics

Snag a New Account Bonus

But choose an account that makes sense for the long run.
August 19, 2020